Blog | 6th Oct, 2016

Time to give up on brown coal pipedreams and establish Hazelwood closure transition fund

This week another “clean coal” project has fallen over, demonstrating that the Latrobe Valley needs support from state and federal governments to develop more sustainable options.

It emerged this week that after failing to meet key milestones, Ignite Energy Resources has pulled out of the Advanced Lignite Demonstration Program (ALDP), a 2012 scheme jointly funded by the Victorian and Federal governments. The program promised to sink millions of taxpayer dollars into finding new uses for Victoria’s brown coal. From dozens of applicants, three projects were selected in 2014.

In the two years since, two of the three projects have collapsed. Ignite, which would have been awarded $20 million of joint funding, follows Chinese company Shanghai Electric, which last year withdrew from their proposed coal briquetting plant, for which they were promised $25 million under the ALDP.

The remaining company, Coal Energy Australia, promised $30 million, would have missed key deadlines, but has now been granted two extensions to give it more time to secure the necessary environment and planning approvals.

In a worrying sign that their expertise lies in extracting taxpayers funds more than developing new projects, one of the causes of delay is that Coal Energy Australia is taking legal action to try and avoid paying any tax on their $30m grant from the State and Federal governments!

The decision to grant a stay of execution to Coal Energy Australia is surprising. After avoiding the issue in the lead up to the 2014 election, the Andrews government is now developing a coal policy. This includes a review of public investment in coal projects, which will show that decades of trials have failed to become commercial or to deliver any tangible benefits to the region.

If the Coal Energy Australia project went ahead, it would create two million tonnes of climate pollution every year – adding almost 2 percent to Victoria’s emissions. Government rhetoric emphasises the need for early and ambitious action on reducing emissions. Approving a project that increases state emissions by 2 percent is anachronistic at best.

Equally problematic is that continuing to prop up go-nowhere coal projects distracts from efforts to invest in real solutions for the Latrobe Valley.

The Latrobe Valley is much more than a coal resource. The electricity sector is far from the biggest employer in the region; with healthcare, retail, construction, manufacturing, public administration and education all above it on employment figures.

Certainly the region faces significant challenges as coal-power stations and mines are phased out and Victoria shifts to clean energy. This shift is expected to start later this month, when Hazelwood’s owner ENGIE makes a decision on the future of the country’s dirtiest power station.

However the Latrobe Valley is not alone in facing down this challenge. Communities across the world have dealt with and are dealing with industrial decline and economic adjustment. In looking to examples such as Germany and manufacturing centres in the US – it becomes clear that the most successful economic transitions are those that are led by the community and supported by all levels of government.

The Andrews government has already committed $40 million to support economic transition in the Latrobe Valley. This is a good start, but more is needed.

In contrast, the Turnbull government is yet to provide a cent towards supporting the community of the Latrobe Valley as its economy changes. Energy Minister Josh Frydenberg has so far taken a hands-off approach to Australia’s coal generators, but he (and local MP Darren Chester) urgently need to announce how the Turnbull government will support the Valley through this transition.

As part of Julia Gillard’s Clean Energy Future package in 2012, $200 million was available for structural adjustment packages for regions where power stations might close. That funding was scrapped by the Coalition when they scrapped the carbon price, but is the scale of intervention that is needed.

The collapse of another ALDP project frees up a further $20 million of funding that could and should go towards establishing a Hazelwood closure transition fund that helps build new and sustainable economic activity. No amount of money seems capable of getting long-shot coal projects off the ground.

Events of the past few weeks make it clear that the Latrobe Valley’s future will not lie in the continued use of brown coal. It’s time we valued the Latrobe Valley for its people and its skills, not just what’s under the ground.